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In a unanimous ruling, the Court of Appeal expressly backed the reasoning of Carr J in the Merrix case on the same issue, which received a mixed response from the legal and costs professions in February.

Lord Justice Davis said the ‘good reason’ provision was a valuable safeguard, and ‘goes a considerable way to meeting [barrister for the paying party] Mr Hutton’s doom-laden predictions of detailed assessments becoming mere rubber stamps of case management orders, and of injustice for paying parties.’

Lord Justice Davis

Source: Photoshot

The judge added that it was better not to give ‘generalised’ guidance as to what would amount to good reason, as this could ‘safely’ be left to costs judges in individual cases.

On a second point, the Court of Appeal adopted a different approach in relation to costs that were already incurred before the date of the budget. It said incurred costs should be subject to detailed assessment in the normal way, without an extra requirement of good reason before a costs judge can depart from the amount put forward at the relevant costs management hearing.

Davis LJ said: ‘The costs incurred before the date of the budget were never agreed in this case. Nor were they ever “approved” by the costs management order… Accordingly such incurred costs are to be the subject of detailed assessment in the usual way, without any added requirement of “good reason” for departure from the approved budget.’

Costs expert Professor Dominic Regan told the Gazette it was no surprise that the ‘elegant’ judgment of Carr J in Merrix was unanimously affirmed. ‘But the paying party can take satisfaction from the fact that they have the right to a detailed assessment of costs already incurred,’ he said. Regan added: ‘The timing of this ruling is perfect, in that it provides Sir Rupert Jackson with an opportunity to comment on it, if he wishes, in his report [on the extension of fixed recoverable costs] next month.’

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What is stark staring bonkers is that a Judge hearing a costs management conference has no power to interfere with incurred costs which means that advocates who come before me are making all sorts of provisos when dealing with the other side's budget, such as that the hourly rates aren't agreed. As a result, there is now a full blown detailed assessment of the incurred costs but so long as the later costs are within the budget, they aren't to be touched unless there is good reason.

This is going to make CCMC's longer and more difficult and heaven knows, they are difficult enough already. The big difficulty with costs budgets is that they are speculative and may involve a certain amount of crystal ball gazing. At least with a detailed assessment the work has been done.

Appellant’s counsel: But M’Lord it might help if I put it this way. There is nothing in the CPR which prevents a detailed assessment going ahead after a costs budget and on the standard basis this means that the costs have to be reasonable and proportionate.

Davies LJ: Yes but as you know under Paragraph 7.3 of PD 3E the court must consider whether budgeted costs fall within the range of reasonable and proportionate costs at the CMO stage and this is why a good reason must be shown at a DA hearing to move from that costs budget. The two limbs of a standard basis assessment have already been taken into account when the CMO is made. What am I missing here?

Respondent’s counsel: M’Lord if I could interject.

Davies LJ: No, sit down. I’m seriously wondering whether it was reasonable and proportionate for you to appear before the Court on this point.

Appellant’s counsel: M’ Lord, I am instructed that the Rules say that a standard basis assessment at the end of a case must be subject to reasonableness and proportionality.

Davies LJ: Can you please tell me what the point is of having a CMO if the future costs that are budgeted are then subjected to a line by line assessment?

Appellant’s counsel: M’Lord there is reference in my skeleton to..erm…something about the budget being an available fund. Please bear with me as I find it. The observation was made by a highly respectable Costs Judge and as soon as I’ve got it (the skeleton, not the observation) I will repeat it to you…

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